FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

               For the quarterly period ended September 30, 2001
   --------------------------------------------------------------------------

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from _____________________ to _____________________


                             Commission file number
                                     0-21558
                     ---------------------------------------


                            CNL Income Fund XII, Ltd.
-----------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Florida                                          59-3078856
-----------------------------------              ----------------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)


450 South Orange Avenue
Orlando, Florida                                             32801
------------------------------------             ----------------------------
(Address of principal executive offices)                   (Zip Code)


Registrant's telephone number
(including area code)                                    (407) 540-2000
                                                 ----------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No _________





<PAGE>


                                    CONTENTS





Part I                                                                Page


   Item 1.    Financial Statements:

                  Condensed Balance Sheets                             1

                  Condensed Statements of Income                       2

                  Condensed Statements of Partners' Capital            3

                  Condensed Statements of Cash Flows                   4

                  Notes to Condensed Financial Statements              5-8

   Item 2.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                  9-14

   Item 3.   Quantitative and Qualitative Disclosures About
                  Market Risk                                          14

Part II

   Other Information                                                   15-16















<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                              September 30,           December 31,
                                                                                  2001                    2000
                                                                           --------------------    --------------------

 <c>
                                ASSETS

    Land and buildings on operating leases, net                                  $  21,340,539           $  21,239,166
    Net investment in direct financing leases                                        8,152,257               9,740,755
    Investment in joint ventures                                                     4,595,520               4,673,593
    Mortgage note receivable                                                                --                  45,375
    Cash and cash equivalents                                                        1,192,072               1,161,018
    Certificates of deposit                                                            536,649                 511,277
    Restricted cash                                                                  1,383,034                      --
    Receivables, less allowance for doubtful accounts
        of $124,402 and $30,338, respectively                                           15,407                 192,518
    Due from related parties                                                            31,855                  28,054
    Prepaid expenses                                                                    23,123                  30,903
    Lease costs, less accumulated amortization
        of $15,500 and $11,490, respectively                                            46,924                  50,933
    Accrued rental income, less allowance for doubtful
        accounts of $85,505 and $161,604, respectively                               2,507,248               2,645,628
                                                                           --------------------    --------------------

                                                                                 $  39,824,628           $  40,319,220
                                                                           ====================    ====================

                   LIABILITIES AND PARTNERS' CAPITAL

    Accounts payable                                                               $    26,893              $   39,360
    Accrued and escrowed real estate taxes payable                                      26,372                   8,853
    Distributions payable                                                              956,252                 956,252
    Due to related parties                                                              64,623                  22,808
    Rents paid in advance and deposits                                                  48,171                  85,863
                                                                           --------------------    --------------------
        Total liabilities                                                            1,122,311               1,113,136

    Commitment (Note 8)

    Partners' capital                                                               38,702,317              39,206,084
                                                                           --------------------    --------------------

                                                                                  $ 39,824,628            $ 40,319,220
                                                                           ====================    ====================
</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                    Quarter Ended                   Nine Months Ended
                                                                    September 30,                     September 30,
                                                                2001              2000             2001             2000
                                                            --------------     ------------   ---------------   -------------

 <c>
Revenues:
    Rental income from operating leases                        $  665,114        $ 642,373       $ 2,098,733     $ 2,026,840
    Adjustments to accrued rental income                               --               --          (297,747 )            --
    Earned income from direct financing leases                    235,898          259,613           730,716         880,353
    Contingent rental income                                        7,877            2,495            12,485           4,209
    Interest and other income                                      28,214           30,026            74,708          91,907
                                                            --------------     ------------   ---------------   -------------
                                                                  937,103          934,507         2,618,895       3,003,309
                                                            --------------     ------------   ---------------   -------------

Expenses:
    General operating and administrative                           51,769           53,484           282,938         162,684
    Professional services                                          21,831           17,471            64,074          37,441
    Management fees to related party                                9,542           11,589            30,520          33,165
    Real estate taxes                                               2,264               --            20,093              --
    State and other taxes                                              --               --            59,150          20,834
    Depreciation and amortization                                 116,306          102,205           338,118         300,861
    Transaction costs                                                  --               --                --          77,277
                                                            --------------     ------------   ---------------   -------------
                                                                  201,712          184,749           794,893         632,262
                                                            --------------     ------------   ---------------   -------------

Income Before Equity in Earnings of Joint Ventures,
    Gain on Sale of Assets and Provision for Loss of
    Assets                                                        735,391          749,758         1,824,002       2,371,047

Equity in Earnings of Joint Ventures                              101,078           87,691           260,226         247,950

Gain on Sale of Assets                                            345,279          106,772           345,279         254,405

Provision for Loss on Assets                                           --               --           (64,518 )            --
                                                            --------------     ------------   ---------------   -------------

Net Income                                                    $ 1,181,748        $ 944,221       $ 2,364,989     $ 2,873,402
                                                            ==============     ============   ===============   =============

Allocation of Net Income:
    General partners                                              $    --           $   --           $    --         $    --
    Limited partners                                            1,181,748          944,221         2,364,989       2,873,402
                                                            --------------     ------------   ---------------   -------------

                                                              $ 1,181,748        $ 944,221       $ 2,364,989     $ 2,873,402
                                                            ==============     ============   ===============   =============

Net Income Per Limited Partner Unit                             $    0.26         $   0.21         $    0.53       $    0.64
                                                            ==============     ============   ===============   =============

Weighted Average Number of Limited
    Partner Units Outstanding                                   4,500,000        4,500,000         4,500,000       4,500,000
                                                            ==============     ============   ===============   =============

</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
                                                            Nine Months Ended            Year Ended
                                                              September 30,             December 31,
                                                                   2001                     2000
                                                         -------------------------   -------------------

 <c>
     General partners:
         Beginning balance                                           $    259,109            $  259,109
         Net income                                                            --                    --
                                                         -------------------------   -------------------
                                                                          259,109               259,109
                                                         -------------------------   -------------------

     Limited partners:
         Beginning balance                                             38,946,975            38,951,767
         Net income                                                     2,364,989             3,820,216
         Distributions ($0.64 and $0.85 per
            limited partner unit, respectively)                        (2,868,756 )          (3,825,008 )
                                                         -------------------------   -------------------
                                                                       38,443,208            38,946,975
                                                         -------------------------   -------------------

     Total partners' capital                                       $   38,702,317          $ 39,206,084
                                                         =========================   ===================
</TABLE>
           See accompanying notes to condensed financial statements.


<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                      2001                2000
                                                                                 ---------------     ----------------

 <c>
       Increase (Decrease) in Cash and Cash Equivalents

           Net Cash Provided by Operating Activities                                 $2,883,068           $2,837,999
                                                                                 ---------------     ----------------

           Cash Flows from Investing Activities:
              Proceeds from sale of assets                                            1,382,365            2,019,357
              Additions to land and buildings on operating
                 leases                                                                      --           (1,009,067 )
              Investment in joint venture                                            (1,689,609 )         (1,267,513 )
              Liquidating distribution from joint venture                             1,663,260                   --
              Increase in restricted cash                                            (1,383,034 )                 --
              Collections on mortgage note receivable                                    43,760                4,551
                                                                                 ---------------     ----------------
                     Net cash provided by (used in) investing
                         activities                                                      16,742             (252,672 )
                                                                                 ---------------     ----------------

           Cash Flows from Financing Activities:
              Distributions to limited partners                                      (2,868,756 )         (2,868,756 )
                                                                                 ---------------     ----------------
                     Net cash used in financing activities                           (2,868,756 )         (2,868,756 )
                                                                                 ---------------     ----------------

       Net Increase (Decrease) in Cash and Cash
           Equivalents                                                                   31,054             (283,429 )

       Cash and Cash Equivalents at Beginning of Period                               1,161,018            1,870,366
                                                                                 ---------------     ----------------

       Cash and Cash Equivalents at End of Period                                    $1,192,072           $1,586,937
                                                                                 ===============     ================

       Supplemental Schedule of Non-Cash Financing
           Activities:

              Distributions declared and unpaid at end of
                 period                                                               $ 956,252            $ 956,252
                                                                                 ===============     ================

</TABLE>
           See accompanying notes to condensed financial statements.





<PAGE>
                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2001 and 2000


1.       Basis of Presentation:

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of management,  necessary to a fair statement
         of the results for the interim periods presented. Operating results for
         the  quarter and nine  months  ended  September  30,  2001,  may not be
         indicative  of the  results  that may be  expected  for the year ending
         December  31, 2001.  Amounts as of December  31, 2000,  included in the
         financial   statements,   have  been  derived  from  audited  financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XII, Ltd. (the  "Partnership")  for the year ended December
         31, 2000.

2.       Reclassification:

         Certain  items in the  prior  year's  financial  statements  have  been
         reclassified to conform to 2001 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.

3.       Land and Buildings on Operating Leases:

         Effective  January 2001, the Partnership  terminated the lease relating
         to its  property  in  Albany,  Georgia.  As a result,  the  Partnership
         reclassified  the building portion of this asset from net investment in
         direct  financing  lease to building on operating  lease. In accordance
         with statement of Financial  Accounting  Standards No. 13,  "Accounting
         for Leases," the  Partnership  recorded the  reclassified  asset at the
         lower of original cost,  present fair value, or present carrying value.
         No loss on  reclassification of direct financing lease was recorded for
         financial reporting purposes. In connection therewith,  the Partnership
         entered   into  a  new  lease  with  a  new  tenant  with  lease  terms
         substantially the same as the Partnership's other leases.

         In  September  2001,  the  Partnership  sold its  property  in  Rialto,
         California to a third party for  approximately  $1,423,000 and received
         net sales proceeds of approximately  $1,382,400  resulting in a gain of
         approximately $345,300 for financial reporting purposes.


<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2001 and 2000


4.       Net Investment in Direct Financing Leases:

         At  June  30,  2001,  the  Partnership   established  a  provision  for
         impairment in carrying  value in the amount of $64,518 for its property
         in  Winter  Haven,  Florida  as a result  of the  tenant  vacating  the
         property and ceasing restaurant  operations.  The provision represented
         the difference  between the carrying value of the net investment in the
         direct financing lease at June 30, 2001 and the anticipated sales price
         for the property (see Note 8.) In July 2001,  the  Partnership  and the
         tenant terminated its lease. As a result, the Partnership  reclassified
         the  building  portion  of the  asset  from net  investment  in  direct
         financing  leases  to  land  and  buildings  on  operating  leases.  In
         accordance  with  Statement of Financial  Accounting  Standards No. 13,
         "Accounting  for Leases,"  the  Partnership  recorded the  reclassified
         asset at the lower of original  cost,  present  fair value,  or present
         carrying  amount.  No loss on termination of direct financing lease was
         recorded for financial reporting purposes.

5.       Investment in Joint Ventures:

         In March 2001, Middleburg Joint Venture, in which the Partnership owned
         a 87.54% interest,  sold its property to the tenant, in accordance with
         the purchase option under the lease agreement,  for $1,900,000.  Due to
         the fact that the joint  venture had recorded  accrued  rental  income,
         representing  non-cash amounts that the joint venture had recognized as
         income since the inception of the lease relating to the straight-lining
         of  future  scheduled  rent  increases  in  accordance  with  generally
         accepted  accounting  principles,  a loss of approximately  $61,900 was
         recorded by the joint venture for financial reporting purposes in March
         2001. The  Partnership  dissolved the joint venture in accordance  with
         the  Partnership  agreement  and  did  not  incur a gain or loss on the
         dissolution.

         In April 2001,  the  Partnership  used the proceeds  received  from the
         liquidation of Middleburg  Joint Venture as described  above, to invest
         in a joint venture arrangement,  CNL VIII, X, XII Kokomo Joint Venture,
         with CNL Income Fund VIII, Ltd. and CNL Income Fund X, Ltd. to purchase
         and hold one  restaurant  property.  The joint  venture  acquired  this
         property from CNL BB Corp.,  an affiliate of the general  partners (see
         Note 7). Each of the CNL Income  Funds is an  affiliate  of the general
         partners and a Florida limited partnership  pursuant to the laws of the
         state of Florida. The Partnership accounts for its investment using the
         equity method since the Partnership shares control with affiliates.  As
         of September 30, 2001, the Partnership  owned an 80 percent interest in
         the profits and losses of the joint venture.


<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2001 and 2000


5.       Investment in Joint Ventures - Continued:

         The following presents the combined,  condensed  financial  information
         for all of the Partnerships investments in joint ventures at:
<TABLE>
<CAPTION>
                                                                         September 30,            December 31,
                                                                             2001                     2000
                                                                     ---------------------     -------------------

 <c>
           Land and buildings on operating leases, net                      $   7,624,225            $  6,153,743
           Net investment in direct financing lease                               642,020               1,926,938
           Cash                                                                    29,300                  85,033
           Receivables                                                                922                     193
           Prepaid expenses                                                           912                      --
           Accrued rental income, less allowance for
                doubtful accounts                                                 177,253                 294,356
           Other assets                                                                --                     741
           Liabilities                                                             21,687                  54,005
           Partners' capital                                                    8,452,945               8,406,999
           Revenues                                                               654,218                 779,865
           Net income                                                             526,615                 658,303
</TABLE>

         The Partnership  recognized  income totaling  $260,226 and $247,950 for
         the nine months ended September 30, 2001 and 2000,  respectively,  from
         these joint ventures,  of which $101,078 and $87,691, was earned during
         the quarters ended September 30, 2001 and 2000, respectively.

6.       Mortgage Note Receivable:

         During  1999,  the  Partnership  had  accepted  a  promissory  note  in
         connection with the 1999 sale of one of its properties. During the nine
         months  ended  September  30,  2001,  the  Partnership   collected  the
         outstanding  principal and interest balance of $45,375 relating to this
         promissory note.


<PAGE>


                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2001 and 2000


7.       Related Party Transactions:

         During the nine months ended September 30, 2001, the  Partnership,  CNL
         Income Fund VIII, Ltd., and CNL Income Fund X, Ltd. invested in a joint
         venture arrangement, CNL VIII, X, XII Kokomo Joint Venture to acquire a
         Golden Corral  property from CNL BB Corp.,  an affiliate of the general
         partners,  for a total purchase  price of  $2,112,011.  CNL Income Fund
         VIII,  Ltd.,  and CNL  Income  Fund X, Ltd.  are each  Florida  limited
         partnerships and affiliates of the general  partners.  CNL BB Corp. had
         purchased  and  temporarily  held  title to this  property  in order to
         facilitate the  acquisition  of the property by the joint venture.  The
         purchase price paid by the joint venture  represents the costs incurred
         by CNL BB Corp.  to acquire and carry the property,  including  closing
         costs.

8.       Commitment:

         In May  2001,  the  Partnership  entered  into  an  agreement  with  an
         unrelated third party to sell the property in Winter Haven, Florida. At
         September 30, 2001,  the  Partnership  had  established a provision for
         loss on assets  related to the  anticipated  sale of this property (see
         Note 4 & 9).

9.       Subsequent Event:

         In October  2001,  the  Partnership  sold its property in Winter Haven,
         Florida  to an  unrelated  third  party  for  $1,100,000  and  received
         approximately $1,090,300 of net sales proceeds.


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund XII,  Ltd.  (the  "Partnership")  is a Florida  limited
Partnership  that was organized on August 20, 1991, to acquire for cash,  either
directly or through joint venture and tenancy in common arrangements, both newly
constructed  and  existing  restaurants,   as  well  as  Properties  upon  which
restaurants  were  to  be  constructed  (the  "Properties"),  which  are  leased
primarily  to operators of national  and  regional  fast-food  and  family-style
restaurant chains. The leases are generally  triple-net leases, with the lessees
responsible  for all repairs and  maintenance,  property  taxes,  insurance  and
utilities. As of September 30, 2001, the Partnership owned 47 Properties,  which
included  interests  in six  Properties  owned by joint  ventures  in which  the
Partnership  is a  co-venturer  and one Property  owned with  affiliates  of the
general partners as tenants-in-common.

Capital Resources

         The  Partnership's  primary  source of capital for the six months ended
September  30,  2001 and 2000 was cash  from  operations  (which  includes  cash
received from tenants, distributions from joint ventures, and interest and other
income  received,  less  cash  paid for  expenses).  Cash  from  operations  was
$2,883,068 and $2,837,999 for the nine months ended September 30, 2001 and 2000,
respectively.  The  increase in cash from  operations  for the nine months ended
September 30, 2001, as compared to the nine months ended September 30, 2000, was
primarily a result of changes in the Partnership's working capital.

         Other  sources and uses of capital  included the  following  during the
nine months ended September 30, 2001.

         During  1999,  the  Partnership  had  accepted  a  promissory  note  in
connection with the 1999 sale of one of its  Properties.  During the nine months
ended  September 30, 2001, the Partnership  collected the outstanding  principal
balance of $43,760 relating to this promissory note.

         In March 2001, Middleburg Joint Venture, in which the Partnership owned
a 87.54% interest, sold its Property to the tenant in accordance with the option
under its lease agreement to purchase the Property,  for $1,900,000.  Due to the
fact that the joint venture had recorded  accrued  rental  income,  representing
non-cash  amounts  that the joint  venture had  recognized  as income  since the
inception of the lease relating to the  straight-lining of future scheduled rent
increases in accordance with generally accepted accounting principles, a loss of
approximately  $61,900 was recorded by the joint venture for financial reporting
purposes in March 2001.  As a result,  the  Partnership  received  approximately
$1,663,300  as a  return  of  capital  representing  its  87.54%  share  of  the
liquidation  proceeds  of the joint  venture.  In April 2001,  Middleburg  Joint
Venture was dissolved in accordance with the joint venture agreement. No gain or
loss on the  dissolution  of the joint venture was incurred.  In April 2001, the
Partnership  used these proceeds to invest in a joint venture  arrangement,  CNL
VIII, X, XII Kokomo Joint Venture, to acquire a Property in Kokomo, Indiana with
CNL Income  Fund VIII,  Ltd.  and CNL  Income  Fund X, Ltd.,  each of which is a
Florida limited partnership and an affiliate of the general partners.  The joint
venture  acquired this  Property from CNL BB Corp.,  an affiliate of the general
partners. The affiliate had purchased and temporarily held title to the Property
in order to facilitate the acquisition of the Property by the joint venture. The
purchase price paid by the joint venture  represented  the costs incurred by the
affiliate to acquire the Property,  including closing costs. As of September 30,
2001, the Partnership had  contributed  approximately  $1,689,600 to acquire the
restaurant  Property for an 80 percent interest in the profits and losses of the
joint venture.

         In  September  2001,  the  Partnership  sold its  Property  in  Rialto,
California to a third party for approximately  $1,423,000 and received net sales
proceeds  of  approximately  $1,382,400  resulting  in a gain  of  approximately
$345,300 for financial reporting  purposes.  The Partnership intends to reinvest
the proceeds received from the sale in an additional Property.  In May 2001, the
Partnership  entered into an agreement with an unrelated third party to sell its
Property in Winter Haven,  Florida.  In October 2001, the  Partnership  sold the
Property for  $1,100,000  and  received  approximately  $1,090,300  of net sales
proceeds.  The  Partnership  intends to reinvest the proceeds  received from the
sale  in an  additional  Property.  The  general  partners  believe  that  these
transactions,  or a portion thereof, relating to the sales of the Properties and
the reinvestment of the proceeds will qualify as like-kind exchange transactions
for  federal  income tax  purposes.  The  Partnership  will  distribute  amounts
sufficient to enable the limited partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the general  partners),  resulting from
the sales.

         Currently,   cash  reserves,   rental  income  from  the  Partnership's
Properties and any amounts  collected  from the promissory  note are invested in
money market accounts or other short-term,  highly liquid  investments,  such as
demand  deposit  accounts  at  commercial  banks,   money  market  accounts  and
certificates  of deposit  with less than a 90-day  maturity  date,  pending  the
Partnership's  use  of  such  funds  to  pay  Partnership  expenses  or to  make
distributions  to the  partners.  At September  30, 2001,  the  Partnership  had
$1,192,072 invested in such short-term investments, as compared to $1,161,018 at
December 31, 2000.  The funds  remaining at September 30, 2001,  will be used to
pay distributions and other liabilities of the Partnership.

Short-Term Liquidity

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them  under  triple-net  leases to  operators  who meet  specified
financial standards minimizes the Partnership's  operating expenses. The general
partners  believe that the leases will  continue to generate cash flow in excess
of operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of operating  expenses of the Partnership,  to the extent that
the general partners  determine that such funds are available for  distribution.
Based on current cash from operations the Partnership declared  distributions to
the limited  partners of $2,868,756 for each of the nine months ended  September
30,  2001 and  2000,  respectively,  ($956,252  for each of the  quarters  ended
September 30, 2001 and 2000). This represents distributions for each of the nine
months ended  September  30, 2001 and 2000 of $0.64 per unit ($0.21 per unit for
each applicable quarter). No distributions were made to the general partners for
the  quarters  and nine months  ended  September  30, 2001 and 2000.  No amounts
distributed to the limited partners for the nine months ended September 30, 2001
and 2000 are required to be or have been treated by the  Partnership as a return
of capital for purposes of  calculating  the limited  partners'  return on their
adjusted  capital  contributions.  The  Partnership  intends to continue to make
distributions  of cash available for  distribution to the limited  partners on a
quarterly basis.

         Total  liabilities  of  the  Partnership  increased  to  $1,122,311  at
September 30, 2001, from  $1,113,136 at December 31, 2000. The general  partners
believe that the  Partnership  has  sufficient  cash on hand to meet its working
capital needs.

Long-Term Liquidity

         The  Partnership  has no long-term  debt or other  long-term  liquidity
requirements.

Results of Operations

         During the nine months ended September 30, 2000, the Partnership  owned
and leased 43 wholly owned Properties (which included two Properties sold during
2000) and during the nine months ended September 30, 2001, the Partnership owned
and leased 41 wholly owned  Properties  (which included one Property sold during
2001)  to  operators  of  fast-food  and  family-style   restaurant  chains.  In
connection therewith,  during the nine months ended September 30, 2001 and 2000,
the Partnership earned $2,531,702 and $2,907,193, respectively, in rental income
from  operating  leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from these Properties, of which $901,012 and
$901,986  was earned  during the  quarters  ended  September  30, 2001 and 2000,
respectively.  The decrease in rental and earned  income  during the nine months
ended  September  30, 2001,  as compared to the nine months ended  September 30,
2000, was partially due to the fact that during the nine months ended  September
30, 2001, the tenant of the Property in Albany, Georgia terminated its lease. As
a result  of the  lease  termination,  the  Partnership  reversed  approximately
$155,000 in accrued rental income  relating to this  Property.  No such reversal
was recorded during the nine months ended September 30, 2000. The accrued rental
income was the accumulated amount of non-cash accounting  adjustments previously
recorded in order to recognize  future scheduled rent increases as income evenly
over the term of the lease.  The  Partnership  re-leased  the  Property to a new
tenant  with  lease  terms  substantially  the same as the  Partnership's  other
leases.

         Rental and earned income  decreased  approximately  $73,500  during the
nine months  ended  September  30,  2001,  as a result of the fact that in April
2001, the tenant of the Property in Winter Haven,  Florida  vacated the Property
and ceased making rental payments on this Property. As a result, during the nine
months ended September 30, 2001, the Partnership reversed approximately $142,500
in accrued rental income  relating to this  Property.  The accrued rental income
was  the  accumulated  amount  of  non-cash  accounting  adjustments  previously
recorded in order to recognize  future scheduled rent increases as income evenly
over the term of the  lease.  The  general  partners  will  continue  to  pursue
collection of past due rental  amounts  relating to this  Property.  The general
partners  will not record  rental and earned  income  relating to this  Property
until a  replacement  tenant is  located or until the  Property  is sold and the
sales proceeds are reinvested in an additional  Property.  The general  partners
are currently  seeking a new tenant or purchaser for this Property.  The general
partners  expect  that rental and earned  income  will remain at reduced  levels
until the Property is re-leased or sold.

         In 1998, Long John Silver's,  Inc. filed for  bankruptcy,  rejected the
leases  relating to three of the eight  Properties it leased,  and ceased making
rental payments to the  Partnership.  Subsequently,  two of the three Properties
with rejected  leases were sold and one was re-leased to a new tenant.  In 1999,
Long John Silver's,  Inc. assumed and affirmed its five remaining leases and the
Partnership  has  continued to receive  rental  payments  relating to these five
leases.  The decrease in rental and earned  income  during the nine months ended
September 30, 2001, as compared to the nine months ended September 30, 2000, was
partially  attributable to the fact that during 2000, the  Partnership  received
approximately  $55,600 in bankruptcy  proceeds  relating to the Properties whose
leases were rejected in 1998, as described above. No such proceeds were received
during the nine months ended September 30, 2001.

         In addition,  rental and earned income decreased during the quarter and
nine months  ended  September  30,  2001,  as compared to the nine months  ended
September  30, 2000 due to the fact that during the nine months ended  September
30, 2001, the Partnership established an allowance for doubtful accounts related
to its Property in  Columbus,  Georgia.  The tenant of the Property  experienced
financial difficulties and ceased making rental payments to the Partnership. The
general  partners will continue to pursue  collection of past due rental amounts
relating to this Property.  No such amounts were reserved during the nine months
ended September 30, 2000 relating to this Property.

         In  addition,  rental  income  decreased  during the nine months  ended
September 30, 2001, as compared to the nine months ended  September 30, 2000, as
a  result  of the  2000  sales  of the  Properties  in  Bradenton,  Florida  and
Cleveland, Tennessee. The decrease was partially offset by an increase in rental
and earned income during the nine months ended September 30, 2001 as a result of
the Partnership  reinvesting a portion of these net sales proceeds in a Property
in Pooler, Georgia in April 2000.

         In addition, during the quarters ended September 30, 2001 and 2000, the
Partnership  owned and leased six  Properties  (including one Property which was
sold in 2001) indirectly through joint venture  arrangements and one Property as
tenants-in-common  with the  affiliates of the general  partners.  In connection
therewith,  during  the nine  months  ended  September  30,  2001 and 2000,  the
Partnership  earned  $260,226 and $247,950,  respectively,  attributable  to net
income earned by joint ventures, $101,078 and $87,691 of which was earned during
the quarters ended  September 30, 2001 and 2000,  respectively.  The increase in
net income earned by these joint ventures during the nine months ended September
30, 2001, as compared to the nine months ended September 30, 2000, was primarily
attributable  to the fact that in August  2000,  the  Partnership  invested in a
Property in Colorado Springs,  Colorado,  as  tenants-in-common  with CNL Income
Fund VII, Ltd., a Florida  limited  partnership  and an affiliate of the general
partners,  and in  April  2001,  the  Partnership  invested  in a joint  venture
arrangement,  CNL VIII,  X, XII Kokomo  Joint  Venture,  as  described  above in
"Capital  Resources."  The increase in net income earned by these joint ventures
was  partially  offset  by a  decrease  due to the  fact  that  in  March  2001,
Middleburg  Joint  Venture in which the  Partnership  owned an 87.54%  interest,
recognized a loss of approximately  $61,900 for financial  reporting purposes as
the  result  of the  sale  of its  Property,  as  described  above  in  "Capital
Resources".

         Operating expenses,  including  depreciation and amortization  expense,
were  $794,893 and $632,262  for the nine months  ended  September  30, 2001 and
2000,  respectively,  of which  $201,712 and $184,749 were  incurred  during the
quarters  ended  September  30,  2001 and 2000,  respectively.  The  increase in
operating  expenses during the nine months ended September 30, 2001, as compared
to the nine months ended  September 30, 2000, was partially  attributable  to an
increase in the costs  incurred for  administrative  expenses for  servicing the
Partnership and its Properties,  as permitted by the Partnership  agreement.  In
addition,  the increase in operating  expenses was partially  attributable to an
increase in state taxes  incurred by the  Partnership  due to changes in the tax
laws of a state in which the Partnership conducts business.

         Operating   expenses  also  increased  during  the  nine  months  ended
September 30, 2001, as compared to the nine months ended September 30, 2000, due
to an increase in depreciation expense.  During 2001, the Partnership terminated
the leases  relating to its  Properties  in Albany,  Georgia  and Winter  Haven,
Florida,  and  reclassified  the assets from net investment in direct  financing
leases to land and building on operating leases. The Property in Albany, Georgia
was re-leased to a new tenant in January 2001. In accordance  with  Statement of
Financial  Accounting Standards No. 13, "Accounting for Leases," the Partnership
recorded the  reclassified  assets at the lower of original  cost,  present fair
value or present  carrying  amount.  No loss on  reclassification  was  recorded
during the quarter and nine months ended  September 30, 2001.  In addition,  the
Partnership  incurred  certain  expenses such as legal fees,  real estate taxes,
insurance and maintenance relating to the Property in Winter Haven, Florida as a
result of the tenant vacating the Property,  as described above. The Partnership
will  continue  to incur  these  expenses  until a new  tenant or  purchaser  is
located.  The general  partners are currently  seeking a  replacement  tenant or
purchaser for this Property.

         The  increase  in  operating  expenses  during  the nine  months  ended
September 30, 2001 was partially  offset by the fact that during the nine months
ended September 30, 2000, the Partnership  incurred $77,277 in transaction costs
related to the general partners retaining financial and legal advisors to assist
them in  evaluating  and  negotiating  the  proposed  merger  with CNL  American
Properties  Fund, Inc.  ("APF").  On March 1, 2000, the general partners and APF
mutually  agreed to terminate the merger.  No such expenses were incurred during
the quarter and nine months ended September 30, 2001.

         As a result  of the sale of the  Property  in  Rialto,  California,  as
described  above in  "Capital  Resources",  the  Partnership  recorded a gain of
$345,279 for  financial  reporting  purposes  during the quarter and nine months
ended  September 30, 2001. As a result of the sale of the Property in Bradenton,
Florida,  during the quarter and nine months ended  September 30, 2000,  and the
sale of the  Property in  Cleveland,  Tennessee,  during the nine  months  ended
September 30, 2000,  the  Partnership  recorded a gain of $106,772 and $254,405,
respectively, for financial reporting purposes.

         During the nine  months  ended  September  30,  2001,  the  Partnership
recorded a provision  for loss on assets in the amount of $64,518 for  financial
reporting purposes relating to the Property in Winter Haven, Florida. The tenant
vacated this  Property and ceased  payment of rents under the terms of its lease
agreement.  The provision  represented the difference between the carrying value
of the Property at September 30, 2001 and the estimated net realizable value for
the Property.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Inapplicable.

<PAGE>


                           PART II. OTHER INFORMATION


Item 1.    Legal Proceedings.   Inapplicable.
           ------------------

Item 2.    Changes in Securities.       Inapplicable.
           --------------------------

Item 3.    Default upon Senior Securities.   Inapplicable.
           -------------------------------

Item 4.    Submission of Matters to a Vote of Security Holders.   Inapplicable.
           ----------------------------------------------------

Item 5.    Other Information.   Inapplicable.
           ------------------

Item 6.    Exhibits and Reports on Form 8-K.
           ---------------------------------

           (a)  Exhibits

                3.1    Affidavit and  Certificate of Limited  Partnership of CNL
                       Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2  to
                       Registration  Statement No.  33-43278-01 on Form S-11 and
                       incorporated herein by reference.)

                4.1    Affidavit and  Certificate of Limited  Partnership of CNL
                       Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2  to
                       Registration  Statement No.  33-43278-01 on Form S-11 and
                       incorporated herein by reference.)

                4.2    Amended and Restated Agreement of Limited  Partnership of
                       CNL Income  Fund XII,  Ltd.  (Included  as Exhibit 4.2 to
                       Form  10-K  filed  with  the   Securities   and  Exchange
                       Commission on April 15, 1993, and incorporated  herein by
                       reference.)

                10.1   Management  Agreement  between CNL Income Fund XII,  Ltd.
                       and CNL Investment  Company  (Included as Exhibit 10.1 to
                       Form  10-K  filed  with  the   Securities   and  Exchange
                       Commission on April 15, 1993, and incorporated  herein by
                       reference.)

                10.2   Assignment of Management  Agreement  from CNL  Investment
                       Company to CNL Income Fund  Advisors,  Inc.  (Included as
                       Exhibit 10.2 to Form 10-K filed with the  Securities  and
                       Exchange  Commission on March 31, 1995, and  incorporated
                       herein by reference.)

                10.3   Assignment of Management  Agreement  from CNL Income Fund
                       Advisors,  Inc. to CNL Fund Advisors,  Inc.  (Included as
                       Exhibit 10.3 to Form 10-K filed with the  Securities  and
                       Exchange  Commission on April 1, 1996,  and  incorporated
                       herein by reference.)

                10.4   Assignment   of  Management   Agreement   from  CNL  Fund
                       Advisors,  Inc. to CNL APF  Partners,  LP.  (Included  as
                       Exhibit 10.4 to Form 10-Q filed with the  Securities  and
                       Exchange  Commission on August 13, 2001, and incorporated
                       herein by reference.)

                (b)    Reports on Form 8-K

                       No  reports on Form 8-K were  filed  during  the  quarter
                       ended September 30, 2001.


<PAGE>



                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 9th day of November, 2001.


                                    By:  CNL INCOME FUND XII, LTD.
                                         General Partner


                                         By:/s/ James M. Seneff, Jr.
                                            ----------------------------------
                                            JAMES M. SENEFF, JR.
                                            Chief Executive Officer
                                            (Principal Executive Officer)


                                         By:/s/ Robert A. Bourne
                                            ----------------------------------
                                            ROBERT A. BOURNE
                                            President and Treasurer
                                            (Principal Financial and
                                            Accounting Officer)